The Pound US Dollar (GBP/USD) exchange rate surged on Wednesday, climbing to a two-week high as markets reacted to the US-Iran ceasefire and a broad risk-on rally.
Pound to Dollar (GBP/USD): 1.34211 (+0.13%)
Euro to Dollar (EUR/USD): 1.16772 (-0.09%)
Dollar to Japanese Yen (USD/JPY): 158.456 (-0.16%)
DAILY RECAP:
The US Dollar (USD) fell sharply as geopolitical tensions eased following the announcement of a temporary ceasefire between the United States and Iran.
The agreement, which includes a pause in hostilities and the reopening of the Strait of Hormuz, triggered a strong improvement in global risk sentiment.
Equity markets rallied while oil prices declined, reducing demand for safe-haven assets and placing the US Dollar under pressure.
USD sentiment was also cautious ahead of the release of the Federal Reserve’s latest policy meeting minutes.
Meanwhile, the Pound (GBP) advanced strongly against the US Dollar but delivered a more mixed performance elsewhere.
While the risk-on mood supported Sterling against safe-haven currencies, it limited gains against more risk-sensitive peers.
At the same time, expectations for Bank of England policy were adjusted following the ceasefire.
With lower energy prices expected to ease inflationary pressures, markets have scaled back expectations for multiple rate increases, limiting broader GBP upside.
GBP/USD Forecast: Strong US Inflation to Underpin the ‘Greenback’?
Turning to the second half of the week, the Pound to US Dollar exchange rate is likely to remain sensitive to developments in the Middle East.
If the ceasefire holds and risk sentiment remains strong, the US Dollar could remain under pressure.
However, GBP/USD will also be influenced by upcoming US inflation data.
Signs of persistent inflationary pressures or a pickup in price growth could support expectations for a more hawkish Federal Reserve, potentially underpinning the ‘Greenback’.
